Walsh Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
Walsh Corporation uses activity-based costing to compute product
margins. In the first stage, the activity-based costing system
allocates two overhead accounts-equipment expense and indirect
labor-to three activity cost pools-Processing, Supervising, and
Other-based on resource consumption. Data to perform these
allocations appear below:
| Overhead costs: | ||||
| Equipment expense | $ | 55,000 | ||
| Indirect labor | $ | 7,000 | ||
Distribution of Resource Consumption Across Activity Cost
Pools:
| Activity Cost Pools | |||
| Processing | Supervising | Other | |
| Equipment expense | 0.10 | 0.70 | 0.20 |
| Indirect labor | 0.50 | 0.10 | 0.40 |
Finally, sales and direct cost data are combined with Processing
and Supervising costs to determine product margins.
Activity:
| MHs (Machining) | Orders (Order Filling) | |
| Product Q! | 1,000 | 700 |
| Product S6 | 19,000 | 1,300 |
| Total | 20,000 | 2,000 |
Finally, sales and direct cost data are combined with Processing
and Supervising costs to determine product margins.
Sales and Direct Cost Data:
| Product Q1 | Product S6 | |||
| Sales (total) | $ | 134,600 | $ | 186,300 |
| Direct materials (total) | $ | 76,000 | $ | 64,800 |
| Direct labor (total) | $ | 40,800 | $ | 78,400 |
What is the product margin for Product Q1 under activity-based
costing?
Homework Answers
First stage allocation
| Processing | Supervising | Other | Total | |
| Equipment expense | 5500 | 38500 | 11000 | 55000 |
| Indirect labor | 3500 | 700 | 2800 | 7000 |
| Total | 9000 | 39200 | 13800 | 62000 |
Calculate production margin of product Q1
| Sales | 134600 |
| Direct material | 76000 |
| Direct labor | 40800 |
| Processing (9000/20000*1000) | 450 |
| Supervising (39200*700/2000) | 13720 |
| Product margin | 3630 |
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Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
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